Release Date: February 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PPAP Automotive Ltd (BOM:532934, Financial) reported a 15% year-on-year increase in EBITDA to INR 10.9 crores.
- The EBITDA margin improved by 116 basis points year-on-year, from 7.5% to 9.1%.
- The company's aftermarket division has established a strong network across India and is now exploring international markets.
- PPAP Automotive Ltd (BOM:532934) has secured contracts with customers planning to launch electric vehicles, including Maruti Suzuki and Tata Motors.
- The company has obtained certification from EcoVadis and is recognized as a Great Place to Work, enhancing its sustainability credentials.
Negative Points
- Revenue dropped from INR 124.8 crores to INR 119.7 crores on a quarter-on-quarter basis.
- The company registered a slight decline in PAT from INR 0.3 crores to INR 0.2 crores year-on-year.
- The consolidated financials showed a net loss of INR 2.7 crores, primarily due to the lithium-ion battery business.
- The tractor segment witnessed a 5% decline in sales volume due to subdued demand from a delayed harvest season.
- Capacity utilization stood at 70% in Q3 due to seasonal factors and annual maintenance at the OEM level.
Q & A Highlights
Highlights from PPAP Automotive Ltd (BOM:532934) Q3 FY '24 Earnings Call
Q: Could you provide details on the order book for Honda Elevate and the content per vehicle for this model?
A: The domestic volume for Honda Elevate is approximately 4,000 to 5,000 vehicles per month, with export volumes expected to reach around 3,000 vehicles by March. The content per vehicle is valued at INR 6,000. (Sachin Jain, CFO)
Q: Are we exploring any export opportunities? And do we anticipate a moderation in raw material costs going forward?
A: Yes, we are focusing on export opportunities. We have already exported shipments to UAE and the U.S. Regarding raw material costs, macro indexes show a softening trend, and we expect prices to come down. (Abhishek Jain, CEO)
Q: Are there any considerations or discussions regarding adopting a cost-plus model with OEMs to mitigate the impact of raw material cost fluctuations on margins?
A: Some products are under the indexing system with customers, compensating for raw material price changes. We are working to extend this indexing to more materials and customers. (Abhishek Jain, CEO)
Q: What is the status of the commercial toolroom business? Have we secured any significant orders?
A: We have an order book of around 65 tools for this financial year. While we are gradually gaining traction, no significant value orders have been received yet. (Sachin Jain, CFO)
Q: What percentage of our top line revenue comes from the aftermarket vertical? And what are the associated margins in that segment?
A: The aftermarket vertical contributes around 3% of the top line, with expected margins of around 9% to 10% for this financial year. (Sachin Jain, CFO)
Q: Have you seen any scale-up in our battery business?
A: We are facing challenges in the battery business. We have developed 50-plus batteries, but customer products are still under certification, delaying scale-up. (Sachin Jain, CFO)
Q: How do we foresee the demand shaping up in FY '25?
A: FY '25 may be challenging due to it being a post-election year. Growth will continue but may be less than this financial year. We are launching new products to boost our top line. (Abhishek Jain, CEO)
Q: What are our plans for margin expansion?
A: We are focusing on three areas: securing inflationary cost increases from customers, improving internal manufacturing efficiency, and derisking the supply chain. (Abhishek Jain, CEO)
Q: What is the current capacity utilization, and do we have any CapEx plans for the next 2-3 years?
A: Capacity utilization for Q3 was 70%. We do not have any major CapEx plans currently and will align capacity with customer requirements. (Sachin Jain, CFO)
Q: Why has our revenue growth been flat despite the industry growing by 7%?
A: The flat revenue growth is due to higher tool sales last year and less tool sales this year. When combining the automotive top line of both PPAP and our JV company, we have grown by around 10%. (Sachin Jain, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
